NPCI extends UPI market cap deadline to 2026; removes user onboarding limits for WhatsApp

The National Payments Corporation of India (NPCI) has extended the deadline for compliance with the UPI market cap rule by two more years, providing relief to dominant players like PhonePe and Google Pay. This extension, announced on December 31, 2024, moves the deadline to December 31, 2026.

Key Highlights:

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  1. Extended Compliance Timeline:
    • NPCI had initially set a deadline of December 31, 2024, for third-party app providers (TPAPs) to cap their UPI transaction volumes at 30%.
    • The extension, following a similar one granted earlier, aims to support digital payment growth and provide time for market adjustments.
  2. Market Dominance:
    • PhonePe and Google Pay currently dominate the UPI ecosystem, collectively holding 85% of the market.
    • PhonePe leads with a 48% market share, followed by Google Pay at 37%.
  3. WhatsApp Gets a Boost:
    • In a bid to encourage competition, NPCI has lifted user onboarding limits for WhatsApp, enabling it to expand its UPI presence.
    • WhatsApp Pay, though a late entrant, has struggled to gain significant traction.
  4. Encouraging Competition:
    • New players like Navi, super.money, and Fampay entered the top 10 UPI apps in 2024.
    • However, these entrants account for less than 2% of the market, leaving the PhonePe-Google Pay duopoly largely unchallenged.

Background:

In November 2020, NPCI introduced the market cap rule to prevent any single TPAP from exceeding 30% of UPI transaction volumes. This regulation aimed to ensure a level playing field and foster competition. Bank apps, exempt from the cap, remain minor players in the UPI space.

Implications:

The extension provides dominant players more time to comply while allowing NPCI to work on fostering a more competitive UPI ecosystem. The removal of WhatsApp’s onboarding limits signals an effort to diversify user choices in the UPI market.